105 Pages Posted: 11 Oct 2005
Bilateral and multilateral investment treaties, such as NAFTA, give foreign investors substantive rights - such as freedom from expropriation - as well as the right to sue host governments for violations of the substantive rights enumerated in the investment treaties. In the last five years, the number of arbitrations arising under investment treaties has skyrocketed; billions of taxpayer dollars are at stake and government conduct, which would otherwise past domestic muster, is subject to enhanced international scrutiny. The proliferation of these bilateral and multi-lateral investment treaties has led to an unprecedented increase in the number of arbitration tribunals convened to resolve investor-state disputes. Arbitral tribunals are now testing and evaluating a variety of international law rights for the first time. These private tribunals consider legal issues that impact the international economy, public policy and international relations, but they do so in a vacuum largely because of gaps in the academic literature and confidentiality obligations that prevent public decision-making. Substantive obligations in investment treaties are remarkably similar; notwithstanding these similarities, in the absence of valuable guidance from scholars or appellate bodies, arbitral tribunals have come to inconsistent decisions on the meaning of fundamental international law rights. This Article recommends a framework for analysis as well as a series of reforms designed to prevent inconsistent decisions from occurring and to correct inconsistencies when they occur. In terms of preventative measures, the article is a call to arms for academics to contribute to the literature in this emerging discipline to provide authoritative guidance for tribunals to use during the decision making process; it also recommends changes to institutional rules and treaties to enhance transparency and promote public scrutiny. In terms of corrective measures, this article rejects the treaty-by-treaty approach previously suggested within the literature. Instead, it proposes the creation of one independent and permanent appellate body with the authority to review awards rendered under the entire investment treaty network. These measures will promote the integrity and legitimacy of a private dispute resolution system with wide-ranging public implications.
Keywords: Bilateral investment treaty, inconsistent decisions, foreign direct investment, dispute resolution, arbitration, investment treaty arbitration
JEL Classification: F20, F21, K10, K20, K33
Suggested Citation: Suggested Citation
Franck, Susan D., The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions. Fordham Law Review, Vol. 73, p. 1521, 2005. Available at SSRN: https://ssrn.com/abstract=812964